They are calling this the Fed Drift. I believe they call it that because folks think the market tends to drift higher into the Fed meeting. Let's talk about the Fed meeting.
I am not a Fed watcher. I am not an economist. I don't even play one on television. But I have noticed there is a strong debate as to whether the Fed will cut on Wednesday or if it will wait until July. Then the debate carries further: If there's a cut on Wednesday, is it bullish or bearish?
The thinking, or my understanding of the current thinking, is that the economy has slowed down so much so a cut now should be taken as negative. The folks in that camp believe we should sell the news.
Then there are the folks who believe any Fed cut in rates is a reason to buy, no matter the "why" behind the cut. Lower interest rates should lead to higher stock prices. Those folks would say the market should breakout on a Fed cut.
But wait, there's more. What if the Fed changes the language and then cuts in July? Do we have to go through this entire exercise a month from now? Or does the market then rally in anticipation of the July cut? Of course between now and then we have the big G-20 meeting, where perhaps the Chinese trade war situation will be quieted down. Or not.
My view is typically that all of this back and forth and 53 different scenarios should be muted (remember my motto: mute the news) and we should just focus on the indicators. Here's the problem: The indicators are heading into the Fed-meeting in no man's land.
The market got overbought late last week, so by Wednesday it will no longer be overbought, but it won't be back to an oversold condition. Thus the Oscillator will be in the middle of nowhere.
Sentiment-wise we are no longer seeing as much negativity and bearishness as we saw two weeks ago - and as I have noted, that gloom has lifted but not nearly enough to believe the market is complacent. Sentiment is in the middle of nowhere since it doesn't lean too heavily to one side or the other.
It's not even as if breadth is faltering. It's not. What breadth we lost on Friday, we gained on Monday.
I'm not even sure bonds tell us anything since the yield on the 10-Year Treasury Note closed at 2.57% Monday and it was 2.57% on May 31. So what exactly is priced in there in the last 2-plus weeks?
In other words typically I let the indicators determine what I think the news and market narrative will be, but when the indicators are not leaning one way or the other I get the sense that perhaps the market participants are not leaning too heavily one way or another.
It continues to seem to me we are working off the overbought condition in the market and that's it.